{"id":3564,"date":"2021-03-12T00:00:00","date_gmt":"2021-03-12T00:00:00","guid":{"rendered":"https:\/\/staging.azafinance.com\/2021\/03\/12\/africas-freedom-rising-too-slowly\/"},"modified":"2021-03-12T00:00:00","modified_gmt":"2021-03-12T00:00:00","slug":"africas-freedom-rising-too-slowly","status":"publish","type":"post","link":"https:\/\/azafinance.com\/africas-freedom-rising-too-slowly\/","title":{"rendered":"Africa’s freedom rising too slowly","gt_translate_keys":[{"key":"rendered","format":"text"}]},"content":{"rendered":"\n

Africa\u2019s economic freedom rising, though much too slowly<\/strong><\/h2>\n\n\n\n

Economic freedom is improving in\u00a0sub-Saharan Africa,\u00a0according to\u00a0this year’s\u00a0Economic Freedom Index,\u00a0published by the Heritage Foundation. Progress, however, remains painfully slow. In the Washington DC-based think tank\u2019s scale of 1 to 100,\u00a0sub-Saharan African nations\u2019 scores on property rights, government integrity, and business freedom are all lower than world averages by 10 points or more. Mauritius remains the brightest spot as\u00a0sub-Saharan Africa’s\u00a0freest nation in the 2021\u00a0index, ranking No. 13 among countries worldwide. It is the only country\u00a0in the region\u00a0considered\u00a0‘mostly free’ \u2013 though\u00a0even in Mauritius, chronic issues with government integrity are considered to hold it back.\u00a0The Republic of Congo had the region\u2019s most improved overall score in the 2021 index, which was just enough for the economy to escape from the lowest\u00a0‘repressed’\u00a0category.\u00a0Morocco ranked as the best country in North Africa, and No. 9 for the Middle East and North Africa, and\u00a0No.\u00a081 worldwide.\u00a0Morocco\u2019s overall\u00a0economic freedom score, unchanged at 63.3,\u00a0means the economy is seen as ‘moderately free’.\u00a0A decline in trade freedom was offset by improvements in monetary freedom and other scores.\u00a0Part of the African Continental Free Trade Agreement (AfCFTA) initiative must drive at seeing improvements in economic freedom accelerate.<\/p>\n\n\n\n

Naira 4 Dollar = Devaluation<\/strong><\/h2>\n\n\n\n

The\u00a0Naira weakened significantly\u00a0on\u00a0the parallel market, dropping below 480\u00a0to the dollar\u00a0levels at 485 most recently. The Central Bank of Nigeria introduced a \u2018Naira 4 Dollar Scheme\u2019 for\u00a0remittances\u00a0from the diaspora, in what is being seen by markets as effectively a further official devaluation. In a\u00a0circular issued to all\u00a0deposit\u00a0banks\u00a0and\u00a0international\u00a0money\u00a0transfer\u00a0operators (IMTOs), the CBN\u00a0said\u00a0that all recipients of diaspora remittances through approved IMTOs and commercial banks\u00a0will\u00a0receive an extra 5 Naira\u00a0for every\u00a0dollar\u00a0received as\u00a0a\u00a0remittance inflow. This means that a dollar fetching 412 at the official rate last week will instead now pay 417. Effective from March 8 to May 8, the scheme is designed\u00a0to encourage the inflow of diaspora remittances and\u00a0forms part of the\u00a0central bank’s\u00a0continued efforts to\u00a0improve\u00a0remittance inflows into the country through official sources.\u00a0It is also intended to\u00a0reduce\u00a0rent-seeking activities\u00a0and\u00a0to\u00a0provide\u00a0Nigerians in the diaspora with\u00a0a\u00a0cheaper and\u00a0more convenient way of sending remittances.
On the I&E\u00a0Window\u00a0(NAFEX),\u00a0the Naira\u00a0weakened to a low of 415\u00a0compared\u00a0to\u00a0the previous week’s close of 411.88, due to the latest perceived devaluation of the currency.\u00a0In the coming week, we expect the Naira to slide further toward 500,\u00a0as market rates react negatively to the\u00a0Naira 4 Dollar Scheme. On the NAFEX front, the Naira\u00a0could\u00a0weaken towards 425 levels in a\u00a0bid\u00a0to converge towards the parallel market.<\/p>\n\n\n\n

Ghana Eurobond bodes well for Cedi<\/strong><\/h2>\n\n\n\n

The Cedi remained stable at 5.7265 per dollar levels as the Bank of Ghana’s fortnightly intervention provides support for the currency. Every two weeks, the central bank is taking part in a $50m Foreign Exchange Forward Auction. Separately, the government has started the process to raise $5bn from the international capital markets to support growth-oriented expenditures in its 2021 budget and to conduct liability management in both Eurobonds and domestic debt. The government intends to raise the borrowing through Eurobonds, diaspora bonds, sustainable bonds, and syndicated\u00a0or\u00a0bridge loans, the Ministry of Finance said on Tuesday. News reports of a renegotiation in power supply contracts may be a positive economic indicator.\u00a0The anticipated issuance should help spur strengthening against the dollar in the medium term. For now, we expect the Cedi to remain stable\u00a0at\u00a0around 5.72 levels in the coming week.<\/p>\n\n\n\n

Rand rebounds from 2-month low<\/strong><\/h2>\n\n\n\n

The Rand rallied from a two-month low to 14.94 against the dollar, supported by commodities soaring to an 8-month high, along with improved economic data at home. Statistics South Africa said year-on-year GDP fell by 4.1% during the fourth quarter, compared to an expected 4.6% decline, while on a quarter-on-quarter and on a seasonally adjusted and annualised basis there was a robust 6.3% growth, versus an expected 5.6%. The economy contracted 7% in the 2020 calendar year,\u00a0the\u00a0biggest drop in annual GDP since 1946, compared to 0.2% growth in 2019.\u00a0The manufacturing industry\u00a0saw the biggest recovery in the fourth quarter, with\u00a0output\u00a0surging\u00a021%\u00a0compared with the previous quarter,\u00a0followed by the construction sector,\u00a0up\u00a011.4%. Other industries including\u00a0trade, catering, and accommodation\u00a0\u2013 also showed\u00a0positive growth after the government freed those parts of the economy\u00a0from lockdown\u00a0restrictions.\u00a0Taking into account\u00a0the vaccination programme\u00a0and\u00a0the\u00a0opening up\u00a0of\u00a0the economy, we\u00a0expect business sentiment to improve further and\u00a0project the\u00a0Rand to appreciate in the coming days.<\/p>\n\n\n\n

Senegal\u00a0rocked by opposition protests<\/strong><\/h2>\n\n\n\n

Business in Senegal\u00a0ground to\u00a0a standstill as unrest rocked\u00a0the country.\u00a0The latest\u00a0protests\u00a0on\u00a0Monday\u00a0came\u00a0hours after authorities freed opposition leader Ousmane Sonko.\u00a0By Wednesday, diplomats on the ground said the situation had calmed. Sonko’s case\u00a0has sparked deadly protests, threatening to erode Senegal\u2019s reputation as one of West Africa\u2019s most stable nations.\u00a0Opposition\u00a0supporters are accusing President Macky Sall of pursuing criminal charges to derail\u00a0Sonko\u2019s\u00a0prospects in the 2024 election. Amnesty International says at least eight people have died since unrest broke out last week in the capital, Dakar.\u00a0<\/p>\n\n\n\n

Kenyan Shilling gains as vaccine spurs hope of tourists returning<\/strong><\/h2>\n\n\n\n

The\u00a0Shilling strengthened\u00a0slightly\u00a0to 109.7 against the dollar during the week from 109.8 levels last week, on the back of markets expecting a positive economic recovery from the COVID-19 emergency. News that vaccinations had arrived in the country last week also reinforced the Shilling.\u00a0However, a\u00a0decline\u00a0in foreign dollar inflows\u00a0to\u00a0business\u00a0sectors\u00a0\u2013 including\u00a0tourism and horticulture\u00a0\u2013\u00a0and continued\u00a0global economic\u00a0uncertainty\u00a0could lead market participants to opt to\u00a0hold dollars and other hard currencies, putting pressure on the Shilling in the medium term.\u00a0That said, we expect the support of the local currency to come from central bank\u00a0reserves, which\u00a0remained adequate at\u00a0$7.359 billion (4.52 months of import cover)\u00a0on\u00a0March 4, down from\u00a0$7.605 billion\u00a0on\u00a0Feb 25.\u00a0The\u00a0$246m decline in reserves was due to\u00a0interest payments on Kenya\u2019s external debt,\u00a0the\u00a0payment of government suppliers from\u00a0overseas,\u00a0and\u00a0the Central Bank of Kenya’s\u00a0sale of dollars\u00a0in\u00a0the market\u00a0to mitigate\u00a0exchange rate volatility.
Kenya’s economic outlook is expected to improve as its vaccination programme is rolled out. The\u00a0government\u00a0plans to vaccinate 1.25m people by June and\u00a0a further\u00a09.6m\u00a0during\u00a0the next phase. Further\u00a0vaccine\u00a0deliveries are\u00a0expected within weeks. Foreign tourists could start to return in the medium term as more vaccinations take place.\u00a0We foresee continued improvement to the\u00a0Shilling in the coming week, on the back of the better economic outlook.\u00a0<\/p>\n\n\n\n

Kenyan ban on Ugandan maize pressures Shilling<\/strong><\/h2>\n\n\n\n

The Shilling traded in 3653 to 3663 range, maintaining its levels from last week, as dollar demand from companies matched inter-bank inflows from commodity exporters. Uganda received the first batch of 864,000 doses of the AstraZeneca vaccine under the Covid-19 Vaccine Global Access (Covax) programme on Friday. It started the first phase of its vaccination programme on Wednesday, with priority given to public healthcare workers. The country also received 100,000 vaccine doses donated by the Indian government.
In economic news, the Kenyan government banned maize imports from Uganda last Friday, citing an acute increase in chronic aflatoxin-related illnesses. It followed a ban on the import of poultry products \u2013 including chicken and eggs \u2013 from Uganda, enforced in January. The latest ban is likely to further impact hard currency inflows into Uganda as Kenya is a major market for the country’s maize. The maize ban will see Uganda lose around $121m in annual revenue, according to the Bank of Uganda. Uganda exports at least 90% of its maize to Kenya with a cumulative average of 330,620 tonnes a year. The Ugandan government has called for a crisis meeting with its Kenyan counterparts. We foresee pressure on the Shilling in the coming week, reinforced by the maize ban.<\/p>\n\n\n\n

Tanzanian 25-year bond and slower inflation supports Shilling\u00a0<\/strong><\/h2>\n\n\n\n

The\u00a0Shilling traded unchanged against the dollar\u00a0in the\u00a02314\u00a0to\u00a02324\u00a0range.\u00a0On Monday,\u00a0the National Bureau of Statistics\u00a0released its\u00a0annual headline inflation\u00a0data, which showed a slowing to 3.3% in February from\u00a03.5% in January.\u00a0The Bureau said the slight drop was due to a decline in the prices\u00a0of non-food items.\u00a0The Bank of Tanzania\u00a0on Wednesday\u00a0launched\u00a0a 25-year Treasury bond, which will be auctioned\u00a0on April\u00a021.\u00a0The central bank\u00a0said\u00a0the bond\u00a0will have\u00a0a fixed coupon of 15.95%. The bond forms part of the government’s programme to lengthen the maturity profile of its domestic debt, and will also help to raise funds\u00a0for long-term development projects. We foresee stable\u00a0a Shilling in the coming week, helped by the slower rate of inflation\u00a0and as the 25-year bond attracts foreign investors and currency inflows.<\/p>\n\n\n\n

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Issued\u00a0by\u00a0AZA. This Newsletter is produced as a service to our clients. It is prepared by our dealing professionals and\u00a0is based on their understanding and interpretation of market events. AZA cannot\u00a0be held responsible for any losses of whatever nature sustained as a result of action taken based on comments contained in this publication.<\/em><\/p>\n","protected":false,"gt_translate_keys":[{"key":"rendered","format":"html"}]},"excerpt":{"rendered":"

Africa\u2019s economic freedom rising, though much too slowly Economic freedom is improving in\u00a0sub-Saharan Africa,\u00a0according to\u00a0this year’s\u00a0Economic Freedom Index,\u00a0published by the Heritage Foundation. Progress, however, remains painfully slow. In the Washington DC-based think tank\u2019s scale of 1 to 100,\u00a0sub-Saharan African nations\u2019 scores on property rights, government integrity, and business freedom are all lower than world averages […]<\/p>\n","protected":false,"gt_translate_keys":[{"key":"rendered","format":"html"}]},"author":1,"featured_media":3565,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[19],"tags":[278,249,22,296,204,205,206,207,316,209,308,26,27,365,32,363,364,354,396,298,299,34,397,217,300,218,357,301,192,231,33,302,252,366,398,257,303,304,182,358,359,305,253],"class_list":["post-3564","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-fx-insights","tag-africa-covid19","tag-africa-debt","tag-africa-foreign-exchange","tag-africa-forex","tag-african-currencies","tag-african-currencies-forex","tag-african-currencies-naira","tag-african-currencies-vs-dollar","tag-cedi-vs-dollar","tag-covid-19-africa","tag-covid-19-kenya","tag-egypt","tag-egyptian-pound","tag-egyptian-pound-vs-dollar","tag-ghana-cedi","tag-ghana-cedi-in-dollar","tag-ghana-cedi-rate","tag-kenya-2021","tag-kenya-maize-ban","tag-kenyan-shilling-rate","tag-kenyan-shilling-vs-dollar","tag-naira","tag-naira-4-dollar","tag-naira-after-lockdown","tag-naira-rate","tag-naira-rate-covid-19","tag-naira-usd-liquidity","tag-naira-vs-dollar","tag-rand","tag-rand-range","tag-rand-rate","tag-rand-vs-dollar","tag-senegal","tag-senegal-economy","tag-senegal-protests","tag-tanzania","tag-tanzanian-shilling-rate","tag-tanzanian-shilling-vs-dollar","tag-uganda","tag-ugandan-election","tag-ugandan-shilling-election-rate","tag-ugandan-shilling-rate","tag-xof"],"acf":[],"gt_translate_keys":[{"key":"link","format":"url"}],"_links":{"self":[{"href":"https:\/\/azafinance.com\/wp-json\/wp\/v2\/posts\/3564","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/azafinance.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/azafinance.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/azafinance.com\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/azafinance.com\/wp-json\/wp\/v2\/comments?post=3564"}],"version-history":[{"count":0,"href":"https:\/\/azafinance.com\/wp-json\/wp\/v2\/posts\/3564\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/azafinance.com\/wp-json\/wp\/v2\/media\/3565"}],"wp:attachment":[{"href":"https:\/\/azafinance.com\/wp-json\/wp\/v2\/media?parent=3564"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/azafinance.com\/wp-json\/wp\/v2\/categories?post=3564"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/azafinance.com\/wp-json\/wp\/v2\/tags?post=3564"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}